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House Financial Services Chairman to Seek Volcker Rule Change

"When Zions Bank announced last month that it expected to take a big loss because of the Volcker Rule, it set off alarms all over Washington. Regulators scrambled to say they were considering changing the rule, but that was evidently not enough for some legislators.

"Representative Jeb Hensarling, a Republican of Texas and chairman of the House Financial Services Committee, is expected to propose a bill that could open up a huge loophole in the rule. The proposed change could allow banks to create and own securities with many types of investments that are barred under the Volcker Rule, which is intended to prohibit speculative trading by banks while letting them both make markets for customers and hedge other investments.

"Jeff Emerson, an aide to Mr. Hensarling, said on Tuesday that the chairman expected to propose the bill soon. A copy of it was provided by another congressional aide, who declined to be identified. It was that aide who raised the possibility of widespread abuse if the legislation were enacted."

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